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National Catastrophic Drug Insurance Revisited: Who Would Benefit from Senator Kirby's Recommendations?

Listed author(s):
  • Thomas F. Crossley
  • Paul V. Grootendorst
  • Michael R. Veall

The recent "Romanow" and "Kirby" inquiries into the Canadian health care system recommended a publicly funded catastrophic prescription drug insurance program to protect Canadians from potentially ruinous drug costs. While the Romanow commission was not specific about the nature of such a program, the Kirby commission recommended that household prescription drug expenses be capped at 3% of total household income, or $1,500 per household member, whichever is lower, with government picking up the remainder. Using recent survey data on household spending, we estimate how the program would assist households of different means and ages, residing in different regions of the country. We find that, despite the fact that senior and low income non-senior households are the primary beneficiaries of provincial government drug plans, average subsidies would be over 4 times higher for these households than for all other (non-senior, non-indigent) households. A small percentage of other households would be among the largest beneficiaries of the program. Program benefits are typically larger in provinces with less generous public coverage and tend to benefit lower income households. Program costs are estimated to be at least $461 million annually, although reductions in out of pocket drug spending will reduce medical tax credits and thereby increase tax revenues by at least $80 million. Program costs appeared to be very sensitive to increased household drug spending that might result from the program introduction.

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Paper provided by McMaster University in its series Quantitative Studies in Economics and Population Research Reports with number 385.

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Length: 32 pages
Date of creation: Jul 2003
Handle: RePEc:mcm:qseprr:385
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  1. P Grootendorst, 1999. "Beneficiary Cost Sharing Under Canadian Provincial Prescription Drug Benefit Programs: History and Assessment," Centre for Health Economics and Policy Analysis Working Paper Series 1999-10, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
  2. Paul Grootendorst & Mitchell Levine, 2002. "Do Drug Plans Matter? Effects of Drug Plan Eligibility on Drug Use Among the Elderly, Social Assistance Recipients and the General Population," Quantitative Studies in Economics and Population Research Reports 372, McMaster University.
  3. Alan, Sule & Crossley, Thomas F. & Grootendorst, Paul & Veall, Michael R., 2002. "The effects of drug subsidies on out-of-pocket prescription drug expenditures by seniors: regional evidence from Canada," Journal of Health Economics, Elsevier, vol. 21(5), pages 805-826, September.
  4. Frank T. Denton & Byron G. Spencer, 1999. "Population Aging and Its Economic Costs: A Survey of the Issues and Evidence," Social and Economic Dimensions of an Aging Population Research Papers 1, McMaster University.
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